Why Volkswagen Is The Most Amazing Car Company In The Industry

By John McElroy Autoline

Any efficiency expert studying Volkswagen would have a fit. On paper the company looks like a productivity basket case.

Get this. VW AG employs 550,000 people globally. That’s a staggering number. Fortune magazine lists it as the 8th biggest employer in the world, behind giants such as Wall Mart and the Chinese post office. VW has almost as many full-time employees as General Motors, Ford and Fiat-Chrysler put together.

On an employee-per-vehicle basis, or a revenue-per-employee basis, Volkswagen looks hopelessly inefficient. And yet VW’s revenue of $200 billion dwarfs everyone else. Last year’s operating profit of $14 billion is the kind of bottom line performance you expect from Big Oil companies. While VW’s stated goal is to become the world’s largest car company by 2018, it’s already there if you measure it by revenue and profits.

So how can VW look so uncompetitive from a productivity standpoint, yet be so profitable?

That’s because today’s business schools have got it all wrong. They teach MBA’s that centralized operations eliminate overlap and duplication. Yet VW maintains strongly decentralized operations with lots of overlap. Business schools preach the benefits of outsourcing to cut cost. Yet VW is very vertically integrated.

All of VW’s brands from Audi to Skoda are treated as stand-alone companies. They have their own boards of directors, their own annual report, their own separate design, engineering and manufacturing. Yes, they do share some platforms and powertrains and purchasing, but that’s it. In other words, they have lots of overlap and duplication.

Guess what? That’s how GM used to run. In the 1960’s GM had over 700,000 employees, was very vertically integrated, and was the most profitable corporation in the world. Then the MBA’s ruined it all.

VW has an enormous competitive advantage that no amount of rationalization, cost-cutting, outsourcing or strategic partnerships is going to overcome. This is a direct threat to every car company in the world, but I wonder how many automotive executives are even aware of what they’re up against.

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Cost of Hurricane Sandy Compared to Other Major US Disasters

Superstorm Sandy will ultimately be known as one of the costliest economic disasters ever experienced in the U.S. An estimated $50 billion will be lost as a result of the storm, says Mark Zandi,chief economist at Moody’s Analytics.

Only Katrina, 9/11 and Hurricane Andrew suffered bigger economic losses, he says.

In a teleconference and webcast this morning, Zandi estimated that Sandy will cost $30 billion in damages to households, businesses and infrastructure and $20 billion in lost output from business, transportation, health care, government and other services.

He cautioned that these s figures are “very preliminary estimates” and total losses ultimately could be higher.

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Nate Silver Bets $1,000 That Obama Wins 2012 Election

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